The Central Board of Direct Tax (CBDT) has decided that short selling of securities would not attract the securities transaction tax (STT). It has also now specified the lending of securities under the SLB scheme would not constitute transfer and, therefore, no capital gains tax would be imposed on the lender.

A CBDT spokesperson confirmed that a circular to this effect has been issued by the tax department.

This stance of the tax department is likely to help operationalise short selling of securities in the Indian capital market by institutional players. Short selling of securities is already available for retail investors.